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Noncompete cases not slowed by economy, legislation

A recent study by Shepherd Law Group shows that noncompete litigation nationwide has continued to trend upward, despite a slowing economy and legislative attempts to curb noncompetes. The latest study shows that noncompete litigation has more than doubled since 1995, and has increased by 61 percent from 2004 to 2009.

Tracking noncompete litigation across the United States is difficult. Unlike in discrimination cases, there are no government agencies to track noncompete litigation. What is more, the various state and federal courts have no mechanism for keeping track of noncompete cases. To get around these problems, the Shepherd Law Group study analyzes judicial opinions published by state and federal courts around the country. This data gives some indication of trends in noncompete litigation over time.

To be sure, the data has limitations. First, since it's based solely on published court opinions, it substantially underreports the number of noncompete lawsuits filed. Many if not most noncompete cases never result in a judge's written decision, and trial-court decisions in many states don't always get picked up by LexisNexis, where this data was collected. Moreover, the number of cases for a given year changes over time, for reasons known only to Lexis. (Compare the data in this post with 2009's "Eight ways to lose a noncompete case" and 2007's "Are noncompetes the new Sarbanes-Oxley?.") The likely explanation is that there is a lag between the filing and the publishing of court decisions.

So while the actual number of published decisions in a given year may not be that useful, the trends are. And if you're wondering about this year, the data suggests that the trend continues. If you prorate the first eleven months of 2010 over the course of a full year (that is, multiply by twelve elevenths), you get an estimate of 965 cases, which is a five percent drop from 2009. But that number will certainly go up over time. I expect that when the dust settles on 2010, we'll see a slight increase over last year's numbers.

Bottom line: noncompete cases have surged over the past decade and a half, and are showing no signs of slowing down. If you're a company looking to guard against unfair competition, a company looking to hire employees who have noncompetes, or one of those employees with a noncompete, make sure you have a noncompete specialist available to help you.

What do you think? Are you seeing an increase in noncompete activity in your industry or practice? Sound off in the comments below.

I used to know an employer that would get so angry whenever an employee would quit that he would do anything in his power to make that person's life miserable. One of the best ways to do that, he found, was by suing them when they got a new job.

Interesting, David. Of course, as you know, searches on Google and Lexis are very different animals. I'd be curious to see what you found.

Relatedly, I've noticed that Google shows a lot of searches for "non compete" as two words, which it never is. "Noncompete" is the correct way to spell it; a hyphen after "non" is incorrect (although Google ignores the hyphen anyway). And a space after "non" is just non sensical. (See what I did there?)

Thanks, Jay. I'm sure part of the problem is that when you google noncompete, it redirects you, asking if you meant "non compete." I guess that a lot of people go for the redirect. I wonder if the original search is recorded for search tracking or left out as errant. If the original is left out, that would explain the lack of a rise in "noncompete" searches. Non sense indeed.

There is no doubt that I am seeing more employees who seek advice considering non-competes they have signed or are being asked to sign. One trend that seems to be much more prevalent than 10 years ago is the number of employers who see non-competes in exchange for severance. You are right to note most of the issues involving non-competes never become evidenced by a published decision.

Interesting figures in your survey..I believe the numbers are truly indicative of a trend that will only continue its upward spiral.